How to Invest In Real Estate Without Buying Property

by | Mar 19, 2024 | blog

Are you looking for an alternative option to invest in the real estate market? Would you like to put your money into a strategy that doesn’t burden you with the responsibility of property ownership and management?
Is a high-yielding, passive income-generating opportunity an attractive proposition for you? If you responded “yes” to any of these questions, then CWS Investments can provide you with such an investment vehicle. Have you ever considered investing in a mortgage note fund?

What is a Mortgage Note Fund?

A mortgage note fund is a pool of investment capital that purchases distressed mortgage notes from the secondary market for purposes of investment. As an investor, you can contribute to the fund and earn income from the profits produced by installments made by the borrower. Here is how it works:
Investing in a mortgage note fund involves a series of steps from the initial capital investment to earning returns. Here’s a step-by-step breakdown of the process:

1. Investment Capital Inflow

Investors contribute capital to the mortgage note fund. This capital may come from individual investors or institutional sources. The invested capital is pooled together. The size of the fund can vary, impacting its purchasing power and diversification capacity.

2. Selection and Acquisition of Mortgage Notes

Fund managers analyze various mortgage notes available in the market. They assess the risk, return potential, and quality of the underlying real estate. Once suitable notes are identified, the fund purchases them. These can be residential or commercial mortgage notes, or a mix of both, depending on the fund’s strategy.

3. Management of the Portfolio

The fund, often through a servicer, manages the portfolio, ensuring timely collection of mortgage payments, handling defaults, and managing any other issues related to the mortgages. Ongoing assessment of the portfolio’s performance and risk is conducted to ensure alignment with the fund’s objectives.

4. Income Generation

The fund generates income primarily from the interest payments made by borrowers on their mortgage loans. In cases of defaults, the fund may initiate foreclosure proceedings and may eventually acquire and sell the property to recover the investment.

5. Distribution of Returns

Income generated is typically distributed to investors regularly, often monthly or quarterly. Investors may have the option to reinvest their earnings back into the fund or receive payouts.

This is the general structure of how a typical mortgage note fund operates. In the case of CWS Investments, returns are distributed as dividends every month. Our fund aims to provide an 8 – 10% annualized return, with distributions distributed monthly through dividends.

So, if you are looking at how to invest in real estate without buying property, investing in our mortgage fund gives you the opportunity to do so.

Here is a List of Other Ways to Invest in Real Estate Without Owning Property

1. Real Estate Investment Trusts (REITs)

REITs own and manage a portfolio of real estate properties and generate income, which they distribute to investors as dividends. REITs are publicly traded on the stock market, offering low-cost entry points and liquidity.

2. Real Estate Mutual Funds

Similar to other mutual funds, a real estate mutual fund pools money from multiple investors to invest in real estate securities. These funds may include investments in various real estate companies and REITs. They provide broad exposure to the real estate sector.

3. Real Estate Syndication

Syndication involves pooling resources from several investors to invest in a single real estate project, such as home construction or the development of commercial spaces. This approach allows investors to participate in larger real estate investments, typically not feasible individually.

5. Investing in Shares of Real Estate Companies

You can alternatively purchase shares of companies in the real estate industry such as those involved in property development, home construction, or real estate management. This investment avenue ties your returns to the performance of these companies in the real estate sector.

6. Real Estate Crowdfunding

Real estate crowdfunding allows investors to contribute smaller amounts of money towards specific real estate projects or investment properties through online platforms. This democratized form of investing in real estate enables access to larger, income-generating properties that were traditionally the domain of well-capitalized investors. CrowdfundConnect and CrowdEngine are examples of popular crowdfunding platforms in the US.

Earn From Real Estate Investments Without Owning Property

Alternative investment strategies allow investors to participate in the real estate market without the need of property ownership or management. In the case of CWS’ Mortgage Note Fund, specialized fund managers oversee the daily activities of the fund and the viability of the mortgage notes in the portfolio. Investing in a mortgage note provides you with a comparatively cost efficient strategy of investing in real estate.

CWS Investments aims to provide an annualized rate of return of 8 – 10% which is distributed to you as monthly dividends. Our investment strategy applies a holistic assessment that involves analysis of the property, the borrower and the note itself before it is included in the investment portfolio. This is an opportunity to earn passive income and build wealth in real estate without buying, owning, or managing property. For more information about investing in a mortgage note fund, contact CWS Investments today.

FAQs: Investing in Real Estate Without Owning Property

1. What are 3 ways to invest in real estate without buying property?

Here are four ways of how to invest in real estate without buying property:

  • Investing in a Mortgage Note Fund: Investors pool capital into a fund that buys distressed notes from the secondary market and earn returns from the profit of mortgage payments. For more information about investing in a mortgage note fund, consult a CWS investment consultant today.
  • Real Estate Investment Trusts (REITs): Publicly traded REITs allow individual investors to purchase shares in a company that owns and manages income-generating real estate. This can be done without owning physical property directly.
  • Real Estate Mutual Funds: Investors can start investing in real estate by purchasing units of real estate funds, which invest in stocks of various real estate developers and companies.
  • Real Estate Crowdfunding: A form of online investing, crowdfunding platforms enable retail investors to pool their money to fund real estate projects, typically requiring a lower initial investment than buying property.

2. What are 3 opportunities in real estate investing for beginners?

  • Real Estate Investment Trusts (REITs)
  • Investing in a Mortgage Note Fund
  • Real Estate Crowdfunding

3. Real Estate Investment Examples

  • Investing in a Mortgage Note Fund: Put your capital into a fund that purchases mortgage notes for investment. Earn passive income at an aimed 8 – 10% annualized rate of return.
  • Investing in a Commercial REIT: Buying shares in a REIT that owns commercial real estate like office buildings or shopping centers.
  • Participating in a Real Estate Crowdfunding Venture: Investing in a new development project in upcoming neighborhoods through an online platform.
  • Purchasing Units in a Real Estate Mutual Fund: A diversified investment in various real estate securities, managed by professional fund managers.

4. What is a Real Estate Investment Trust?

A REIT buys, manages, or invests in real estate. REITs are publicly traded on major stock exchanges. They offer a way to invest in real estate without the need for direct property ownership and are required to pay out at least 90% of their taxable income to shareholders as dividends.

5. How to invest in real estate for passive income

  • Investing in a Mortgage Note Fund: Put your capital into a fund that purchases mortgage notes for investment. Earn passive income at an aimed 8 – 10% annualized rate of return.
  • Invest in REITs: REITs provide regular dividend payments, creating a steady stream of passive income.
  • Join Real Estate Crowdfunding Platforms: These platforms offer opportunities to invest in various real estate projects, often generating rental income or profits from property sales.
  • Buy into Real Estate Limited Partnerships: These partnerships handle the active management of properties, distributing income to investors.

6. Which real estate investment is best?

The “best” investment depends on your individual financial goals, risk tolerance, net worth, and the amount of time you can dedicate to the investment. One of the investment strategies that has gained traction in the recent years is investing in a mortgage note fund. However, consult a financial advisor to help formulate an investment strategy that fits your financial capabilities and investment goals.

7. Where is the most profit in real estate?

Profits in real estate can vary widely based on market trends, location, and the type of investment. Historically, commercial real estate, such as office buildings or retail spaces, can yield high returns. However, they also require significant capital and management.

Residential rental properties can offer steady cash flow and appreciation, especially in high-demand areas. If you are not keen on owning or managing property, then an alternative option like investing in a mortgage note fund would be a viable choice.

8. What part of real estate pays the most?

  • Development and Sale of Properties: Real estate developers who build or renovate properties in new neighborhoods or high-growth areas can realize substantial profits upon sale.
  • Alternative strategies: investing in a mortgage note fund.
  • Commercial Real Estate Investment: Owners of prime commercial properties often earn high returns through rental income and property appreciation.
  • High-End Residential Properties and Luxury Rentals: In affluent areas, these properties can provide significant income through high rental rates and value appreciation.